aco synthesis report

7/28/2019 ACO Synthesis Report

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Suggested Citation

American Hospital Association. 2010 Committee on Research. AHA Research Synthesis Report:

Accountable Care Organization. Chicago: American Hospital Association, 2010.

For Additional Information

Maulik S. Joshi, DrPHSenior Vice President of Research, American Hospital Association(312) [email protected]

Accessible at: http://www.hret.org/accountable/index.shtml

© 2010 American Hospital Association. All rights reserved. All materials contained in this publication areavailable to anyone for download on www.aha.org, www.hret.org, or www.hpoe.org for personal,noncommercial use only. No part of this publication may be reproduced and distributed in any formwithout permission of the publisher, or in the case of third party materials, the owner of that content,except in the case of brief quotations followed by the above suggested citation. To request permissionto reproduce any of these materials, please email [email protected].



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Accountable Care Organizations – AHA Research Synthesis Report

Executive Summary

Introduction

This AHA Research Synthesis Report presents an overview of Accountable Care Organizations (ACOs),

including a discussion on the potential impact of ACOs, key questions to consider in developing an ACO,

and a review of the key competencies needed to be an effective ACO. This report focuses on the overallconcept of ACO yet highlights the specifics of the ACO model proposed in health reform legislation.

What are ACOs?

The term Accountable Care Organization (ACO) describes the development of partnerships between

hospitals and physicians to coordinate and deliver efficient care (Fisher, 2006). The ACO concept

envisions multiple providers assuming joint accountability for improving health care quality and slowing

the growth of health care costs. The concept was also included in national health care reform legislation

as one of several demonstration programs to be administered by Medicare (Patient Protection and

Affordable Care Act, 2010). However, ACOs described in health reform legislation are operationally

different from other ACO models. The role of ACOs in integrating and aligning provider incentives in care

delivery requires participating organizations to posses certain key competencies, as identified in theliterature:

Required OrganizationalCompetencies for ACOs

Key Literature on ACOs

HealthReform(2010)

Shortell/Casalino(2010)

McClellan/Fisher (2010)

Miller (2009)

Fisher/McClellan(2009)

MedPAC(2009)

1. Leadership x x N/A x N/A N/A

2.Organizational culture of teamwork

N/A x N/A x N/A x

3.Relationships with other providers

x x x x x x

4.IT infrastructure for populationmanagement and carecoordination

x x x x x x

5.Infrastructure for monitoring,managing, and reportingquality

x x x x x x

6.Ability to manage financial risk N/A x x x x x

7.Ability to receive and distributepayments or savings

x x x x x x

8.Resources for patienteducation and support

x x N/A x N/A N/A

Information on the impact of ACOs is limited and points to key questions that still need to be answered as

both the federal and private sectors prepare for widespread implementation of the model.

Key Questions to Consider

The following are key questions to consider in the development and implementation of ACOs.

1. What are the key competencies required of ACOs?

2. How will ACOs address physician barriers to integration?

3. What are the legal and regulatory barriers to effective ACO implementation?

4. How can ACOs maintain patient satisfaction and engagement?

5. How will quality benchmarks be established?

6. How will savings be shared among ACOs?



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Introduction

Under the charge of the AHA Committee on Research, the AHA Research Synthesis Reports

seek to answer parts of the AHA’s top research questions. This AHA Research Synthesis

Report addresses the following question from the AHA Research Agenda:

What is the role of the hospital in a new community environment that provides more efficient

and effective health care (e.g., what are the redesigned structures and models, the role and implementation of accountable care organizations, the structures and processes needed to

implement new payment models such as bundled payments, and how do organizations

transition to this new role)?

This report is the second in the series and presents an overview of Accountable Care

Organizations (ACOs), including a discussion regarding the potential impact of ACOs, key

questions to consider in developing an ACO, and a specific review of the key competencies

needed to be an effective ACO.

What are Accountable Care Organizations?

The term Accountable Care Organization (ACO) was formalized by Dr. Elliott Fisher in a 2006

Health Affairs article to describe the development of partnerships between hospitals and

physicians to coordinate and deliver efficient care (Fisher, 2006). The ACO concept, which had

been in existence before the Elliot Fisher article, seeks to remove existing barriers to improving

the value of care, including a payment system that rewards the volume and intensity of provided

services instead of quality and cost performance and widely held assumptions that more

medical care is equivalent to higher quality care (Fisher et al., 2009).

The ACO concept envisions the development of legal agreements between hospitals, primary

care providers, specialists, and other providers to align the incentives of these providers to

improve health care quality and slow the growth of health care costs. ACOs would reach thesegoals by promoting more efficient use of treatments, care settings, and providers (Miller, 2009).

The success of the ACO model in fostering clinical excellence and continual improvement while

effectively managing costs hinges on its ability to incentivize hospitals, physicians, post-acute

care facilities, and other providers involved to form linkages that facilitate coordination of care

delivery throughout different settings and collection and analysis of data on costs and outcomes

(Nelson, 2009). This predicates that the ACO will need to have organizational capacity to

establish an administrative body to manage patient care, ensure high quality care, receive and

distribute payments to the entity, and manage financial risks incurred by the entity.

The ACO model was included in national health care reform legislation as one of several

demonstration programs to be administered by the Centers for Medicare and Medicaid Services

(CMS), along with bundled payment and other key care delivery approaches. ACOs

participating in the CMS program would assume accountability for improving the quality and

cost of care for a defined patient population of Medicare beneficiaries. As proposed, ACOs

would receive part of any savings generated from care coordination as long as benchmarks for

the quality of care are also maintained. Health care reform provides a definition for the ACO

model included in the demonstration programs. However, many details have yet to be defined.



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Many experts believe ACOs in general will include certain core characteristics, including the

participation of a diverse group of providers—including primary care physicians, specialists, and

a hospital—and the ability to administer payments, determine benchmarks, measure

performance indicators, and distribute shared savings (Deloitte, 2010). However, they could

vary in their structure and payment model. For example, the ACO program proposed in health

reform legislation limits provider exposure to financial risks, as it does not deviate from the

current fee-for-service payment system and includes no payment penalties. On the other hand, ACOs that are being paid a fixed price are responsible for financial gain or loss.

This report focuses on the overall concept of the ACO and will attempt to highlight specifics of

the ACO model proposed in health reform legislation where differences appear in existing

literature.

Distinguishing Between ACOs and Earlier Care Delivery Initiatives

Health maintenance organizations (HMOs) and patient-centered medical homes (PCMHs) share

commonalities with the ACO concept as large-scale attempts to improve health care delivery

and payment. Even though the ACO model builds upon these previous attempts at health care

delivery reform, there are variations between the ACO model and HMOs and PCMHs.

ACOs and PCMHs

The PCMH model, which emphasizes strengthening and empowering primary care to

coordinate care for patients across the continuum of care, can be viewed as being

complementary to the ACO model (Devers and Berenson, 2009). Both models promote the

utilization of enhanced resources—including electronic health records, patient registries, and

increased patient education—to achieve the goal of improved care (Miller, 2009). However,

unlike the ACO model, the PCMH does not offer explicit incentives for providers to work

collaboratively to reduce costs and improve quality. Also, the PCMH model calls specifically for primary care providers to take responsibility for coordinating care, which could prove

challenging if these providers do not have resources or established relationships with other

providers to undertake these tasks.

The ACO model is expected to address some of the limitations in the PCMH model. For

instance, the ACO model fosters accountability for care and costs by offering a joint payment to

all providers involved in the provision of care. Also, the ACO model does not specify any type of

provider to take the role as administrator of the ACO, but rather, offers characteristics for the

types of organizations/providers that could assume the role of administrator. Also, unlike the

PCMH model, a variety of payment models have been proposed for the ACO model, ranging

from traditional fee-for-service payment to full capitation. Despite these key differences in the

PCMH and ACO models, it is important to note that, far from being competing models, the

PCMH structure could aid providers in taking on the additional accountability and administrative

activities necessary to become an ACO.

ACOs and HMOs

The key difference between the ACO concept and HMOs lies in the payment structure and level

of provider risk involved. While HMOs have typically been arranged around capitation, ACOs



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recognize variation in regional health care markets and the ability of providers to accept new

payment models (Devers and Berenson, 2009). One proposed payment approach for public

and private-sector ACO programs is the ―shared savings‖ approach, used in the Brookings-

Dartmouth and Medicare ACO program, where providers receive regular fee-for-service

payment but qualify to share in any savings resulting from cost reduction and meeting

predetermined performance and/or utilization targets. Other payment methods proposed in

current literature for ACOs include a bundled payment, negotiated by the providers and payers,for an episode of care or capitation, similar to HMOs. It is important to note that the type of

payment approach adopted is closely related to the level of financial risk that the providers are

expected to assume. The primary criticism of the HMO model is that by making cost reduction

its primary goal it sometimes sacrificed the quality of care. Providers participating in HMOs

have also complained about the inadequate payment rates and high level of financial risk

involved in the HMO model. Policymakers believe the ACO model incorporates some of these

lessons learned from the HMO model.

ACOs and Health Care Reform

The Patient Protection and Affordable Care Act calls for the creation of an ACO programadministered by CMS by January 1, 2012. Qualifying providers, including hospitals, physician

group practices, networks of individual practices, and partnerships between hospitals and other

health care professionals will be eligible to form ACOs. ACOs will ―be willing to become

accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries

assigned to it‖ and will also be expected to meet specific organizational and quality performance

standards—which are still to be determined by CMS—in order to be eligible to receive payments

for shared savings. The legislation does not provide specifics on how ACOs will be held

financially accountable, as they will not be subject to financial risks in the form of payment

penalties if they do not achieve their savings targets (CMS, 2010). Some of the additional

stipulations for ACOs include:

ACOs must have a formal legal structure to receive and distribute shared savings to

participating providers.

Each ACO must employ enough primary care professionals to treat their beneficiary

population (minimum of 5,000 beneficiaries) as deemed sufficient by CMS.

Each ACO must agree to at least three years of participation in the program.

Each ACO will have to develop sufficient information about their participating health care

professionals to support beneficiary assignment and for the determination of payments

for shared savings.

ACOs will be expected to include a leadership and management structure that includes

clinical and administrative systems.

Each ACO will be expected to have defined processes to promote evidence-basedmedicine, report on quality and cost measures, and coordinate care.

ACOs will also be required to produce reports demonstrating the adoption of patient-centered care.

CMS expects to release additional information about the ACO program this fall in a Notice of Proposed Rulemaking (CMS, 2010).



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Potential Impacts of ACOs

Given the recent emergence of ACOs, providers considering participation in the CMS program

do not have a long history of research on practicing ACOs to review. A limited amount of

research exists on payment and delivery initiatives similar to ACOs that have been tested since

as early as 1998 (shown in Box 1). These models include a combination of federal, regional,

state, and local initiatives. These efforts offer some evidence on the potential impact of ACOs

to reduce costs, improve coordination, and better align incentives of providers, payers, andpatients. These efforts also share some of the critical characteristics of the ACO concept,

including care coordination, evidence-based practice, and the sharing of savings based on

improvements in quality and reductions in cost.

Box 1 – Precursors of ACOs

Community Care of North Carolina

Since 1998, the state of North Carolina has operated Community Care of North Carolina, an

enhanced medical home supported by the state’s Medicaid program. The program builds

community health networks organized collaboratively by hospitals, physicians, health

departments, and social service organizations to manage care. Each enrollee is assigned to a

specific primary care provider, while network case managers work with physicians and hospitalsto identify and manage care for high-cost patients. A study by the University of North Carolina

found that the program saved roughly $3.3 million in the treatment of asthma patients and $2.1

million in the treatment of diabetes patients between 2000 and 2002, while reducing

hospitalizations for both patient groups. In 2006, the program saved the state roughly $150 to

$170 million (Kaiser Commission, 2009).

Physician Group Practice Demonstration

In 2005, Medicare developed the Physician Group Practice Demonstration, a group of ten

provider organizations and physician networks to test shared savings. Providers are incentivized

to coordinate care delivered to Medicare patients. Physician groups receive cost and quality

performance payments if they achieve Medicare savings of more than two percent andadditional bonuses beyond the two percent threshold. Performance payments are designed

to reward both cost efficiency and performance on 32 quality measures phased in through the life

of the demonstration. Through year three of the program, all ten participating sites achieved

success on most quality measures, and five collectively received over $25 million in bonuses as

a share of $32 million in Medicare cost reductions (McClellan et al., 2010).

Pathways to Health, Battle Creek, Michigan

In 2006 Integrated Health Partners participated in a chronic disease initiative with Blue Cross

Blue Shield of Michigan (BCBSM). The initiative was later restructured into Pathways to Health,

a framework that includes several local health care stakeholders such as insurers, consumers,

and employers interested in reducing hospitalization and improving chronic care delivery in their

area. Pathways to Health features key ACO concepts such as a patient-centered medical

home, value-based purchasing, and community buy-in. The collaborative is currently

developing a new payment structure and improving its patient data collection efforts. BCBSM

reports that hospitalizations for conditions that can be prevented via better ambulatory care have

dropped 40 percent over the three-year life of the program (Simmons, 2009).



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Even though the models in Box 1 include some characteristics of ACOs and could provide some

insight in the impact of ACOs, federal and private sector ACO programs (Box 2) that are

currently underway or planned for the future could provide better lessons for providers and

payers interested in participating in ACOs.

Key Questions to Consider

Hospitals and other providers interested in participating in private sector and CMS ACO

programs need to consider their preparedness in the face of the limited information available

and identify steps to undertake to facilitate participation in the emerging ACO programs. To aid

hospitals, physician groups, and other organizations in making this assessment, we identify the

following key questions in Box 3 that still need to be addressed and attempt to answer them with

information available from the literature.

Box 2 – Sample ACO Pilots

Brookings/Dartmouth Accountable Care Collaborative

The Brookings Institution and the Dartmouth Institute for Health Policy are currently

collaborating on the development of an ACO model focusing on local accountability, shared

savings, and enhanced performance measurement. Roanoke, Virginia-based Carilion

Clinic, a multi-specialty group practice with more than 500 physicians and seven hospitals,

has been selected by the Brookings/Dartmouth collaborative as a pilot site for ACO

adoption, along with Norton Health System in Louisville and Tucson Medical Center in

Arizona.

Baylor Health System

Dallas-based Baylor Health System, a 13-hospital system with 4,500 physicians, is currentlydeveloping an ACO model with a bundled payment system to control costs and improve care

coordination. Baylor is directly marketing the ACO concept to employers, offering lower costs in

exchange for participation in specific health insurance plans (Deloitte, 2010).

Robert Wood Johnson Foundation Medical School

A pilot ACO program at Robert Wood Johnson Foundation Medical School in New Jersey will

engage 100-500 physicians, several specialties, and six hospitals (Deloitte, 2010). The ACO’s

payment structure is still to be determined, but system leaders envision that the effort will link up

the Robert Wood Johnson Medical Group—the state’s largest multi-specialty network—with the

30 to 40 percent of primary care practices that have existing relationships with the school

(Nelson, 2009).

Premier ACO Collaboratives

In May 2010, the Premier health care alliance announced plans to launch a two-track system for

its member hospitals to participate in an ACO. The first effort, the ACO Implementation

Collaborative, will consist of members who already possess the critical characteristics and

relationships needed for successful ACO participation. The second effort, the ACO Readiness

Collaborative, is designed to prepare hospitals by helping them to develop the skills and

operational capacity necessary to implement in the future. To date, 70 hospitals and 5,000

physicians in 15 states have signed up for the two collaboratives.



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In order to qualify for the CMS program, participating ACOs will have to formalize a

management structure to coordinate operations between participating providers and create a

system for distributing shared payment. In general, the tasks and goals of ACOs will require

both the ACO administrator and participating providers to possess certain core competencies.

The competencies outlined in Table 1 below are identified in recent key literature on ACOs.

Table 1: Required competencies for ACOs as determined by key ACO literature

Required OrganizationalCompetencies for ACOs

Key Literature on ACOs

HealthReform(2010)

Shortell/Casalino(2010)

McClellan/Fisher (2010)

Miller (2009)

Fisher/McClellan(2009)

MedPAC(2009)

1. Leadership x x N/A x N/A N/A

2. Organizational culture of teamwork

N/A x N/A x N/A x

3. Relationships with other providers

x x x x x x

4. IT infrastructure for population managementand care coordination

x x x x x x

5. Infrastructure for monitoring, managing, andreporting quality

x x x x x x

6. Ability to manage financialrisk

N/A x x x x x

7. Ability to receive anddistribute payments or savings

x x x x x x

8. Resources for patient

education and support

x x N/A x N/A N/A

Legend:N/A – indicates that the authors do not explicitly discuss the competency in their literature.X – Even though the indicated authors discuss the key competencies, there may be differences in how theyperceive the importance and application of the competencies in ACOs.

The structure of some care delivery organizations, such as Integrated Delivery Systems (IDSs)may facilitate the formation of an ACO because they may already possess the competenciesidentified in the literature. IDSs typically already assume some accountability for cost andquality, and often possess the population health data needed to effectively administer an ACO

Box 3 – Key Questions on ACOs





5. How will quality benchmarks be established?6. How will savings be shared among ACOs?



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(Miller, 2009). IDSs with high-functioning leadership structures to handle the legal and clinicalrequirements of the ACO model may be best prepared to qualify for an ACO at present(Hastings, 2009). Other care delivery organizations such as Multispecialty Group Practice(MSGP), Physician-Hospital Organization (PHO) and Independent Physician Association (IPA)may possess a partial list of the competencies and need to work on developing others.However, free-standing hospitals, post-acute care providers such as skilled nursing facilities(SNFs), inpatient rehabilitation facilities (IRFs), and long-term care hospitals (LTCHs), and smallphysician practices, can also position themselves to successfully participate in an ACO withappropriate technical assistance and/or practice redesign.

In addition to the core competencies identified in the literature above, there are other important

competencies cited by thought leaders that could help organizations participating in an ACO

acclimate to the novel care delivery and payment structure:

Spread – ability to aggressively identify and disseminate best practices that promote

efficiency of care delivery, improved quality of care, and reduced cost within an

organization. This competency is important both at the individual institution level as well

as the ACO level.

Reach – established linkages between ACOs (or participating organizations) and public

health/community resources in their catchment area to facilitate the transition of patients

from the care delivery setting back into the community.

Regional Health Information Exchange – participation in a multi-stakeholder health

information exchange to share health care information with the goal of improving health

and care in the community.


Overcoming physician attitudes favoring autonomy and individual accountability over

coordination will pose a major challenge to hospitals pursuing an ACO model, especially if they

do not currently enjoy strong affiliations with physician groups who have admitting privileges(Fisher et al., 2006). Physician groups who are already part of integrated health systems may

have an early edge in comparison to independent practice associations preparing to join an

ACO. Physician groups will also have to be convinced that a strong business case exists for

ACO development, and some groups may resist capitation and potential penalties for physicians

related to quality performance, as have been proposed for some ACO models (Deloitte, 2010).

Other challenges may include deciding on the appropriate reimbursement model that is

attractive to physicians and that falls within the existing legal requirements. Organizations

participating in an ACO will also need to navigate differences in what they consider to be the

appropriate use of potential shared savings. While hospitals may choose to use savings tooffset any expenditures related to the ACO implementation or decrease in revenue stream

resulting from reduction in volume, primary care physicians may choose to use the savings to

pay for care management and information technology infrastructure (Miller, 2009).


The actualization of the ACO concept will prove challenging in the current legal environment.

Sharing financial incentives across providers and incentivizing the use of evidence-based

protocols can place participating providers at risk of violating federal laws that govern physician



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self-referral for Medicare patients and laws that protect patients and federal health care

programs from fraud and abuse.

Hospitals preparing to join both federal and private-sector ACO programs may need to assess

and potentially revise their existing contracts with other providers also taking part in the ACO.

Implementing the ACO concept, which may require hospitals and physicians and other

providers to accept one payment for all services and share financial incentives, could be inviolation of previous interpretations of the Anti-Kickback Statute and Civil Monetary Penalty Law

(Fader, 2010). Uncertainty about the antitrust consequences will deter precompetitive,

innovative arrangements. Nonprofit hospitals would need to determine whether their

involvement with participating, for-profit physician practices as part of an ACO complies with

IRS guidelines for nonprofit institutions (Fader, 2010).

The health care reform bill does not create safe harbors or exceptions that address the

operation of ACOs under current laws. However, the bill does permit the Secretary of Health

and Human Services (HHS) to waive the requirements of the Anti-kickback, Stark, and Civil

Monetary Penalty laws as necessary to administer ACOs (Bass, Berry, and Sims, 2010).


Medicare beneficiaries participating in the ACO program may not necessarily be aware of their

assignment within an ACO and will be able to continue to choose their providers, including

those who are not participating in their assigned ACO (CMS, 2010). However, adequate patient

education will still be necessary to ensure that patients do not regard the ACO model

unfavorably. Patients will need to understand how ACOs will impact the care they receive in the

form of better quality, efficient care, and improved health outcomes resulting from coordinated

care.

Since health outcomes are largely dependent on patients’ participation in care, p roviders willneed to actively engage consumers in the care that they receive and ensure that patients have

a basic understanding of health care costs and the importance of efficient care delivery (Miller,

2009). Lastly, ACOs could maintain accountability to patients by measuring and reporting on

patients’ experience of care, in addition to reporting on costs and health outcomes (Miller,

2009).

5. How will quality benchmarks be established?

A critical component of the administration of ACOs that has not been determined in federal

health reform and other key literature pertains to the quality benchmarks to which providers will

be held accountable. Health reform legislation leaves the final decision of measure selection for ACOs to federal health officials, and the available literature does not provide guidance on how

to choose appropriate measures.

As the CMS program and other private ACO initiatives are established, it is important to ensure

that the quality benchmarks established and how they are interpreted and reported are

standardized nationwide. The measures will also have to be applicable to different care

providers and span care settings to accommodate the set of providers included in an ACO.



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Lastly, the benchmarks will need to include a combination of process, outcome, and patient

experience measures in order to accurately evaluate all aspects of care provided.

6. How will savings be shared among ACOs?

Payment reform is an important component of ACOs, since it is the main vehicle for holding

providers accountable for the quality and cost of care that they provide. Experts have proposed

several payment approaches for ACOs, which correlate with the level of risk that providers areexpected to assume. Shortell and Casalino propose a three-tiered approach for risk-reward

payment. In the first tier, which involves no risk, providers will receive shared savings and

bonuses for meeting defined quality measures and staying under the expected costs of

delivering care to patients. In the second tier, providers will receive shared savings for

managing costs and hitting quality benchmarks, and will be liable for care that exceeds

spending targets. In the third tier, providers assume greater risk and are paid through full or

partial capitation. They could also qualify for substantial bonuses for meeting quality and patient

experience targets (Shortell and Casalino, 2010).

The proposed payment model in health reform is a combination of the first and second tier of the Shortell/Casalino model. However, the specifics of it are yet to be defined by federal health

officials. The model of payment for any ACO, as well as associated bonuses and penalties, will

have to be substantial enough to generate change in the way care is delivered.

Conclusions

While some parallels exist between ACOs and existing efforts to coordinate care and integrate

provider activities, substantial gaps exist in how an ACO will be structured and the impact that it

will actually have on care delivery, quality, and costs. The early consensus emerging from ACO

researchers appears to be that the model shows some promise as a driver of both quality

improvement and cost control via care coordination (Devers and Berenson, 2009).

Hospitals and health systems considering ACO participation should assess their capabilities in

several key core competencies that will likely be necessary for successful ACO implementation,

including IT infrastructure, resources for patient education, team-building capabilities, strong

relationships with physicians and other providers, and the ability to monitor and report quality

data. Providers should be prepared to make major investments in these areas where necessary

(Shortell and Casalino, 2010). ACOs whose members already possess many of these

characteristics are expected to be most successful at implementation in the short run (Deloitte,

2010). However, even providers who already possess key organizational, technical and clinical

competencies may find that adjusting to an ACO will still require the sustained development and

strengthening of those capacities in order to be successful (Devers and Berenson, 2010).



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Appendix – Medicare ACO Q & A Document

Medicare “Accountable Care Organizations” Shared Savings Program – New Section 1899 of Title XVIII

Preliminary Questions & Answers

CMS/Office of Legislation

The Affordable Care Act (ACA) improves the health care delivery system through incentives toenhance quality, improve beneficiary outcomes and increase value of care. One of these keydelivery system reforms is the encouragement of Accountable Care Organizations (ACOs).

ACOs facilitate coordination and cooperation among providers to improve the quality of care for Medicare beneficiaries and reduce unnecessary costs. This document provides an overview of

ACOs and the Medicare Shared Savings Program.

Q: What is an “Accountable Care Organization”?

A: An Accountable Care Organization, also called an ―ACO‖ for short, is an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who areassigned to it.

For ACO purposes, ―assigned‖ means those beneficiaries for whom the professionals in the ACO provide the bulk of primary care services. Assignment will be invisible to the beneficiary,and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue toseek services from the physicians and other providers of their choice, whether or not thephysician or provider is a part of an ACO.

Q: What forms of organizations may become an ACO?

A: The statute specifies the following:1) Physicians and other professionals in group practices2) Physicians and other professionals in networks of practices3) Partnerships or joint venture arrangements between hospitals and physicians/

professionals4) Hospitals employing physicians/professionals5) Other forms that the Secretary of Health and Human Services may determine appropriate.

Q: What are the types of requirements that such an organization will have to meet to

participate?

A: The statute specifies the following:1) Have a formal legal structure to receive and distribute shared savings2) Have a sufficient number of primary care professionals for the number of assigned

beneficiaries (to be 5,000 at a minimum)3) Agree to participate in the program for not less than a 3-year period4) Have sufficient information regarding participating ACO health care professionals as the

Secretary determines necessary to support beneficiary assignment and for thedetermination of payments for shared savings.



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5) Have a leadership and management structure that includes clinical and administrativesystems

6) Have defined processes to (a) promote evidenced-based medicine, (b) report thenecessary data to evaluate quality and cost measures (this could incorporaterequirements of other programs, such as the Physician Quality Reporting Initiative(PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c)coordinate care

7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.

Additional details will be included in a Notice of Proposed Rulemaking that CMS expects topublish this fall.

Q: How would such an organization qualify for shared savings?

A: For each 12-month period, participating ACOs that meet specified quality performancestandards will be eligible to receive a share (a percentage, and any limits to be determined bythe Secretary) of any savings if the actual per capita expenditures of their assigned Medicarebeneficiaries are a sufficient percentage below their specified benchmark amount. Thebenchmark for each ACO will be based on the most recent available three years of per-beneficiary expenditures for Parts A and B services for Medicare fee-for-service beneficiariesassigned to the ACO. The benchmark for each ACO will be adjusted for beneficiarycharacteristics and other factors determined appropriate by the Secretary, and updated by theprojected absolute amount of growth in national per capita expenditures for Part A and B.

Q: What are the quality performance standards?

A: While the specifics will be determined by the HHS Secretary and will be promulgated with theprogram’s regulations, they will include measures in such categories as clinical processes andoutcomes of care, patient experience, and utilization (amounts and rates) of services.

Q: Will beneficiaries that receive services from a health care professional or provider that

is a part of an ACO be required to receive all his/her services from the ACO?

A: No. Medicare beneficiaries will continue to be able to choose their health care professionalsand other providers.

Q: Will participating ACOs be subject to payment penalties if their savings targets are notachieved?

A: No. An ACO will share in savings if program criteria are met but will not incur a paymentpenalty if savings targets are not achieved.

Q: When will this program begin?

A: We plan to establish the program by January 1, 2012. Agreements will begin for performance periods, to be at least three years, on or after that date.

Source: https://www.cms.gov/OfficeofLegislation/Downloads/AccountableCareOrganization.pdf

https://www.cms.gov/OfficeofLegislation/Downloads/AccountableCareOrganization.pdf






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Key References

Proposals:

1. Fisher, E.S., Staiger, D.O., Bynum, J. and Gottlieb, D.J. (2006) Creating Accountable Care

Organizations: The Extended Hospital Medical Staff. Health Affairs (26: w44-w57).

Summary: The article introduces the concept of accountable care organizations and explores

the concept of the ―extended hospital medical staff,‖ defined as a hospital-associated multi-

specialty group practice tightly aligned to a specific hospital through direct or indirect referrals.

The article assesses a group of hospitals and their extended medical staffs on their

performance with heart attacks, colon cancer, and hip fractures, finding that hospitals and

extended medical staffs who performed high on quality measures tended to have tighter

affiliations with each other. The authors conclude that the extended medical staff model can

bolster performance measurement, foster local accountability for capacity decisions, and

improve quality and lower costs. The article also outlines some of the barriers to change,

including the fee-for service payment system, the cultural importance U.S. physicianstraditionally place on autonomy and the difficulty less tightly aligned hospitals and physician

groups will have in adjusting to a new model.

http://content.healthaffairs.org/cgi/content/abstract/26/1/w44

2. Fisher, E., McClellan, M., Bertko, J., Lieberman, S., Lee, J., Lewis, J. and Skinner, J. (2009)

Fostering Accountable Health Care: Moving Forward in Medicare. Health Affairs (Web

exclusive).

Summary: The authors survey the variation in health care costs and outcomes in the United

States, and propose the ACO model as part of a major realignment of payment incentives to

support providers in improving care. The article advocates for increased accountability for providers to improve quality and manage costs, a shift away from practices that reward

providers based on the volume and intensity of services and the use of transparent, meaningful

performance measures to evaluate results. The article calls for ACOs to create formal legal

structures, assume responsibility for a defined population of Medicare beneficiaries, and

participate in public reporting of performance measures. In exchange, ACOs would receive

shared savings for meeting quality standards while keeping costs below defined benchmarks.

http://content.healthaffairs.org/cgi/reprint/28/2/w219

3. Shortell, S. and Casalino, L. (2010) Implementing Qualifications Criteria and Technical

Assistance for Accountable Care Organizations. Journal of the American Medical Association, 303 (17): 1747-1748.

Summary: The authors suggest a three-tiered system of ACO qualification, with each level

representing graduated levels of assumed risk and payment incentives. In this model, Level I

ACOs would assume no financial risk but would be eligible for shared savings for meeting

quality and spending targets. Level II ACOs would receive greater proportions of shared savings

but would assume some risk for not meeting agreed-upon targets. Level III ACOs would be









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paid through full or partial capitation. The article also explores the implementation hurdles that

prospective ACOs must pass, including practice redesign, process improvement, EHR

implementation and leadership development.

4. Miller, H. (2009) How to Create Accountable Care Organizations. Center for Healthcare

Quality and Payment Reform.

Summary: This comprehensive assessment surveys the potential of the ACO model for

improving quality and controlling costs, and examines the ways ACOs will impact primary care

physicians, hospitals and consumers. The article notes several potential areas of improvement

for hospitals participating in ACOs, including improved efficiency of patient care, the use of less

costly treatment avenues, reductions in health care-acquired conditions and reductions in

preventable admissions. The author concludes that ACOs will not adhere to a single formula,

and asserts that while long-term improvements are possible, providers should prepare both

organizationally and financially for an extended transition period.

http://www.chqpr.org/downloads/HowtoCreateAccountableCareOrganizations.pdf

5. MedPAC (2009) Report to the Congress: Improving Incentives in the Medicare Program.

Chapter 2.

Summary: The report explores different potential models for ACOs administered by CMS,

including a voluntary program with bonuses for meeting quality and spending targets and a

mandatory model with physicians assigned to hospitals based on Medicare claims. The article

concludes that ACOs could slowly incentivize change, emphasizing the importance ACOs will

need to place on coordination, system thinking and constant refinement.

http://www.medpac.gov/chapters/Jun09_Ch02.pdf

6. Devers, K. and Berenson, R. (2009) Can Accountable Care Organizations Improve theValue of Health Care by Solving the Cost and Quality Quandaries? Robert Wood Johnson

Foundation.

Summary: The authors survey the potential of ACOs for managing patients’ continuum of care

across different institutional settings, better allocation of resources and serving as a framework

for improved performance measurement of patient populations. The article concludes that ACOs

have the potential to improve quality and reduce costs, but will require years of practice and

refinement to reach those goals.

http://www.rwjf.org/qualityequality/product.jsp?id=50609

Evaluation of demonstration projects:

7. Simmons, J. (2010) The Medical Home as Community Effort. Health Leaders. (April 2010,

pp. 50-51).

Summary: The author looks at the three-year-old Pathways to Health collaborative in Battle

Creek, Michigan, an effort that brought together Integrated Health Partners, Battle Creek Health












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System and local health plans to create a framework including a patient-centered medical

home, value-based purchasing and community buy-in. The article focuses on the development

of the ACO, as providers, consumers and health plans met and ultimately formed a leadership

team. The article details efforts to retain accurate patient data and implement Plan-Do-Study-

Act ideals, while creating a new bundled payment structure. So far, Blue Cross Blue Shield of

Michigan reports that hospitalizations ―for those conditions that better ambulatory care can

prevent‖ have dropped forty percent. http://www.healthleadersmedia.com/content/MAG-249300/Quality-The-Medical-Home-as-

Community-Effort

8. Kaiser Commission on Medicaid and the Uninsured. (2009) Community Care of North

Carolina: Putting Health Reform Ideas into Practice in Medicaid.

Summary: This article assesses North Carolina’s Community Care of North Carolina program,

an enhanced medical home model operated by the state’s Medicaid program. The program

relies on nonprofit community networks of hospitals, physicians, health departments and social

service organizations to manage care, and notes that the program saved roughly $3.3 million inthe treatment of asthma patients and $2.1 million in the treatment of diabetes patients between

2000 and 2002, while reducing hospitalizations for both patient groups. In 2006, the program

saved the state roughly $150 to $170 million. The article concludes that the practices developed

by CCNC show promise as tools to implement health reform national and provide ―coordinated,

cost effective care to low-income individuals with significant health needs.‖

http://www.kff.org/medicaid/upload/7899.pdf

9. Nelson, Bryn. (2009) Quality over Quantity. The Hospitalist.

Summary: The article considers the role integrated systems have played in inspiring ACOs, and

surveys a handful of ACO pilots, including Carilion Clinic in Virginia and Robert Wood JohnsonMedical School in New Jersey. The article explores possible ACO frameworks, noting that

successful models will include the key concepts of local accountability, shared savings and

enhanced performance measurements.

http://www.the-hospitalist.org/details/article/477391/Quality_over_Quantity.html

Other Published Literature

10. CMS Office of Legislation (2010) Medicare Accountable Care Organizations Shared Savings

Program: Preliminary Questions And Answers.

Summary: The document provides an overview of the ACO Shared Savings Program as

established in the 2010 Patient Protection and Affordable Care Act, and explores some of the

questions emerging from providers regarding ACO participation, including eligibility for shared

savings, quality performance standards and the release of future information from CMS

concerning the ACO program.


http://www.healthleadersmedia.com/content/MAG-249300/Quality-The-Medical-Home-as-Community-Effort
















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11. McClellan, M., McKethan, A.N, Lewis, J.L., Roski, J., and Fisher, E.S. (2010) A NationalStrategy to Put Accountable Care Into Practice. Health Affairs. (29, No. 5: 982-990).

Summary: The authors analyze ACOs in the context of recent health care reform legislation,suggesting that ACOs should have flexibility in terms of design but should broadly be provider-led organizations centered on primary care, with payments linked to quality improvement and

cost reduction, and increasingly sophisticated performance measurement. The articlediscusses the structures of a variety of potential payment models, including partial capitationmodels integrating flat payments with bonuses and penalties related to performance and costbenchmarks, and ―symmetric‖ payment models that offer providers proportionately larger

bonuses as they assume greater accountability for costs. The authors conclude that ACOs mayhave a modest impact on the transformation of payment models in the short-term, but have thepotential to drive clinical and financial transformation in the long run.http://content.healthaffairs.org/cgi/content/abstract/29/5/982

12. Davis, G. and Rich, J. (2010) Health Care Reform: ACOs and Developments in CoordinatedCare Delivery, Shared Savings and Bundled Payments. McDermott Newsletters.

Summary: The authors compare ACOs to Physician Hospital Organizations (PHOs), arguingthat while PHOs were organized mainly to facilitate managed care contracting, while ACOs aimto better coordinate care as a means to both improve quality and control costs. The article alsonotes some of the key elements of an effective ACO—including medical homes, networks of specialists, care integration and reimbursement models that reward cost-effective high-value-care, and summarizes the provisions of recent health care reform legislation related to ACOsand bundled payment.http://www.mwe.com/index.cfm/fuseaction/publications.nldetail/object_id/6699b22c-127a-4cf0-a80b-bab7a75767de.cfm

13. Burke, T. and Rosenbaum, S. (2010) Accountable Care Organizations: Implications for Antitrust Policy. Robert Wood Johnson Foundation.

Summary: The authors detail the relationship between ACOs and federal antitrust policy.Specifically, the article outlines the emphasis the judiciary system has placed on clinical andfinancial integration as a prerequisite to joint efforts between providers, and notes thatarrangements that do not meet financial integration standards are susceptible to violatingantitrust statute. The article summarizes several recent antitrust cases brought by the FederalTrade Commission in the context of clinical integration, with examples of both sustainedpartnerships and those rejected by the legal system. The article concludes that taken together,the decisions support the enforcement agencies’ position that in order to justify anti -competitivepractices, partnerships between providers must demonstrate collective effort to improve quality

and control costs beyond what would have been achieved independently.http://www.rwjf.org/qualityequality/product.jsp?id=57509

14. Fader, Henry C. (2010) Are Accountable Care Organizations in Your Vocabulary? Pepper

Hamilton, LLP.

Summary: The author details the legal framework for structuring an ACO, arguing that the entitywill require a separate administrative staff that is separate from both the hospital and

http://content.healthaffairs.org/cgi/content/abstract/29/5/982


http://www.mwe.com/index.cfm/fuseaction/publications.nldetail/object_id/6699b22c-127a-4cf0-a80b-bab7a75767de.cfm











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physicians. That staff would be charged with monitoring and providing care both within thehospital and outside the hospital. The article also emphasizes the importance of clinicians in an

ACO model, and assesses the hurdles ACOs will have to overcome to comply with antitrust andanti-kickback statutes.http://www.pepperlaw.com/publications_update.aspx?ArticleKey=1757

15. Deloitte. (2010) Accountable Care Organizations: A New Model for Sustainable Innovation.

Summary: The article outlines the promise of the ACO model for improving care delivery,summarizing the structural guidelines of ACOs included in recent health reform legislation anddiscussing emerging ACO pilots in Massachusetts, Vermont and Colorado. The article arguesthat the degree of integration within current physician models may be a predictor of earlysuccess in creating an ACO. The authors assert that successful ACOs will be defined by strongleadership, governance and operational clinical management capabilities, and outlines thechallenges of physician buy-in, consumer response, the structure of payments and managingrisk before concluding that ACOs will need to carefully structure provider relationships, acceptthat results may be slow in materializing and commit themselves to continual improvement as

clinical conditions change over time.http://www.deloitte.com/view/en_US/us/Industries/US-federal-government/center-for-health-solutions/research/bc087956da618210VgnVCM100000ba42f00aRCRD.htm

16. Hastings, D.A. (2009) Accountable care organizations and bundled payments in HealthReform. Health Law Reporter.

Summary: The author surveys the landscape of proposed health reform legislation, and notesseveral legal challenges to ACO development, including the revision of contracts betweenproviders participating in ACOs, compliance with anti-kickback and antitrust statutes, newcompliance responsibilities related to adherence to ACO regulations and public reporting, theincreased responsibilities of leadership and board management and the integration of bundledpayments with ACOs. The article concludes that ACOs and bundled payments both showpromise as drivers of health care quality improvement.http://www.ebglaw.com/files/37716_BNA%20Article%20-%20Accountable%20Care%20Organizations%20and%20Bundled%20Payments%20in%20Health%20Reform.pdf

17. Bass, Berry, and Sims (2010) The ABCs of ACOs.

Summary: The article analyzes the legal requirements and hurdles providers will face as they

prepare for ACO implementation. Specifically, the article explores ACO compliance with the

Anti-Kickback Statute, the Stark Law, antitrust laws and the Civil Monetary Penalty Law, noting

that while health care reform legislation did not create safe harbors or exceptions to these

statutes in connection to the development of ACOs, the Secretary of HHS has been authorized

to waive requirements of these statutes as necessary.

http://www.bassberry.com/files/Publication/f55dbab0-b844-4a1f-bf0a-

0e34ebab8d7d/Presentation/PublicationAttachment/a98eb254-ce4f-48f3-924b-

0e91896128f7/HealthReformImpact29April2010.pdf

http://www.pepperlaw.com/publications_update.aspx?ArticleKey=1757


http://www.deloitte.com/view/en_US/us/Industries/US-federal-government/center-for-health-solutions/research/bc087956da618210VgnVCM100000ba42f00aRCRD.htm



http://www.ebglaw.com/files/37716_BNA%20Article%20-%20Accountable%20Care%20Organizations%20and%20Bundled%20Payments%20in%20Health%20Reform.pdf




http://www.bassberry.com/files/Publication/f55dbab0-b844-4a1f-bf0a-0e34ebab8d7d/Presentation/PublicationAttachment/a98eb254-ce4f-48f3-924b-0e91896128f7/HealthReformImpact29April2010.pdf













aco synthesis report

Documents